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President Obama and Governor Romney must break the political divide to avoid the fiscal cliff - Image credit: Getty Images via @daylife

In a strong political statement from the private sector, more than 80 CEOs from major U.S. corporations penned a release urging Congress to get its act together and find a bipartisan solution to the coming fiscal cliff. But they went farther, rather than asking Washington to find a solution, the chief executives of companies like General Electric, Boeing, Verizon, Aetna, and Goldman Sachs said raising taxes is unavoidable, but that it must come accompanied by “significant spending restraint.” Despite their political inclinations, they are asking Romney and Obama, Republicans and Democrats, to attack the problem from both sides.

From Wall Street to Main Street, the most powerful men in the American private sector are throwing their weight around and pressuring Congress on the fiscal cliff. In the midst of earnings season, political uncertainty, which studies have shown may have dragged GDP down by 3 percentage points, and the specter of the fiscal cliff (which could reduce disposable incomes by more than 4% in early 2013 according to Goldman Sachs), have been repeatedly cited as a major factor hurting companies’ top and bottom lines.

CEOs took a position on crucial and controversial issues. They called on a financially and politically realistic solution, according to the Wall Street Journal, that includes limiting healthcare spending, making social security solvent, and “comprehensive and pro-growth tax reform, which broadens the base, lowers rates, raises revenues, and reduces the deficit.”

Specifically on taxes, the group of chief executives noted tax hikes are unavoidable. Fixing the deficit without raising taxes makes no mathematical sense, they noted, but that doesn’t mean they are siding with President Obama. They are vouching for “significant spending restraint,” meaning they are looking at both sides of the issue.

Washington must look at the “Simpson-Bowles” plan as an “effective framework,” the CEOs, which included BlackRock’s Larry Fink, Cisco’s John Chambers, and Microsoft’s Steve Ballmer, noted. Thursday’s public statement was orchestrated by a bipartisan group called “Fix the Debt,” which failed to enlist the support of major energy companies and Silicon Valley.

The fiscal cliff has already begun to affect the U.S. economy. Some reports, cited by Goldman Sachs, suggest it has dragged GDP down by three percentage points. While they are skeptical of this number, Goldman’s research team noted that capital spending has weakened materially over the past few months. Core capital goods orders are down approximately 7% over the last three months, they explained, while 6-month forward capital spending plans have fallen to pre-recession levels.

The fiscal cliff is indeed a big obstacle for markets and the economy, particularly if the debate leads to another downgrade of U.S. sovereign debt. But, Goldman’s economists ask if the actual slack in output isn’t actually a more fundamental problem. Major firms have highlighted political uncertainty as a main factor cramping hiring and expansion. But housing, considered by Fed Chairman Ben Bernanke one of the pillars on which the recovery should stand, has remained depressed despite record low mortgage rates. Econometric analysis indicates that the effects of political uncertainty may be overstated, and that the weak economic situation is one of the causes, and not the consequence, of political gridlock, according to Goldman.

Regardless, more than 80 of the most important CEOs in the country have gathered together to put pressure on Washington. They have signed a petition and suggested specific policy initiatives that appeal to both political parties. The onus, as Bernanke has repeatedly put it, is on Congress to get its act together to avoid going over the fiscal cliff.

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If Obama loses the election, you can blame/thank Wall Street for bamboozling him. How is it right that an entire news network questions the President’s citizenship for four years to create doubt in voters while a fringe element of the far right demonizes and degrades him? Most of this is financed by the rich who want to keep their stranglehold on the flow of wealth in our country. Watch the white hands apply the Blackface to our first African-American President at http://dregstudiosart.blogspot.com/2012/10/bamboozling-obama.html

The Journal story that this is based on seemed very fishy to me when I read it this morning. There is no quote from the CEOs statement saying the CEOs actually want to raise taxes or tax rates. The story gives the impression that the CEOs are arguing for higher taxes but it appears they are instead arguing for a pro-growth policy of reducing deductions, simplifying the tax code and lowering tax rates to spur growth, which would increase revenue and reduce the deficit. I’d like to check with the statement itself, but what’s even more fishy is that the statement is nowhere to be found (at least easily). None of the stories about this link to it and the Fix the Debt site itself doesn’t link to it–instead it links to the Journal story!

Agreed, there’s something weird in the story. The Journal had a contradiction, in one place noting that CEOs were for lowering rates, and at another quoting the chief executive of Aetna saying the arithmetic didn’t add up, and then adding outside of the quotes that higher taxes were needed.

There are at least a dozen stories to be found about this- and no two of them draw the same conclusion. In some stories, these CEOs are endorsing higher tax rates, in others supporting increased revenue via the usual Republican methods, expanding the tax base and economic growth. In still other stories, its said these 80 CEOs are intent upon raising taxes on the poor and middle class. It would be tremendously helpful if Forbes or another outlet made the actual release/petition available, or at least crafted a more accurate, precise synopsis, and present the “specific policy initiatives” being proposed.